Here are the highlights from a live blog brought to you by The Wall Street Journal with continually updated coverage of Prime Minister Narendra Modi’s first budget and an analysis of its implications for Indian people, businesses and the economy from reporters in Delhi, Mumbai and Bangalore. Finance Minister Arun Jaitley presented the budget in Parliament at 11 a.m, where he spoke for 2 hours and 15 minutes.

It’s anybody’s guess whether today’s budget is going to include a substantially reduced subsidy bill. The Modi government has already agreed to continue allowing diesel prices to rise gradually, a process that began under the Congress party’s leadership. But the new government’s ministers have offered mixed signals on whether fertilizer, kerosene and cooking-gas prices, too, might be allowed to move toward market rates. And food inflation is still too much of a political hot potato for major rollbacks in government price supports to be very likely.

Two major events this week – the railway budget announced on Monday and the Economic Survey released Tuesday – sent Indian stocks lower, so some analysts are already trying to lower expectations about the budget. “The new government has been in power for just six weeks and (the) budget is just a first step in a five-year run,” Citi wrote in a research note Tuesday. Still, Citi is hoping for moves to kick-start investments, a roadmap for tax reform and steps to improve India’s fiscal situation.

A look at the last five budgets shows that they are usually too optimistic about gross domestic product growth, often wrong about the fiscal deficit and always off when it comes the amount of money the government will get from selling the shares of state-run companies.

On top of the wish list of Adi Godrej, the chairman of consumer-goods company Godrej Group, is the introduction of a national goods and services tax that has been debated for over a decade. A streamlined tax system will help Godrej and others save the money, time and effort needed to pay different taxes in each of India’s 28 states. If implemented, the GST could boost economic growth by 1 to 2 percentage points, economists say.

Young Indians voted for Narendra Modi hoping that he would solve a job shortage, but there’s not much help on the horizon judging by the government’s own projections for economic growth. India is adding 20 million people to its workforce every year but creating jobs for only around half of those people. While the economy needs to grow at around 8% to provide that many jobs, the government projects that the economy will grow between 5.4% to 5.9% this year.

It may struggle to meet even that goal. The government has missed its own growth targets for the past three years.

Tax experts expect some tax breaks to help individuals who have been reeling under the impact of high inflation in recent years. These breaks could include a higher income-tax exemption limits and the introduction of tax-free infrastructure bonds.

In a temporary budget unveiled in February, the last government pegged the budget deficit at 4.1% of gross domestic product for this fiscal year. The new budget will likely nudge that projection higher to close to 4.5%, economists say. If Finance Minister Arun Jaitley can keep that figure at around 4.5%, investors and even rating agencies are unlikely to complain as they understand he has inherited a slowing economy and huge expenditures that the previous government passed on to this year.

Indian telecommunications companies are hoping Finance Minister Arun Jaitley will reduce the different taxes and fees they have to pay. Telecom companies have to pay 28% to 30% of their revenues in the form of various levies such as service tax, airwaves charges and other fees to offer telephone and Internet services.

Prime Minister Narendra Modi wants to create 100 smart cities which will require lots of affordable housing to clean up city slums. India has a housing shortage of close to 20 million homes in urban areas by some estimates. The budget needs to provide tax breaks and other incentives if it ever wants those homes to be built.

Mr. Jaitley says the “sovereign right of government to undertake retrospective taxation” isn’t in question, and that the Modi government will not “ordinarily” pass laws that create new tax obligations. Is this a softening of the BJP’s campaign pledges to end “tax terrorism” in India?

India’s national Internet infrastructure could also use a bit of love. This chart shows how India has one of the lowest average Internet speeds in the world, less than one tenth the speed you get in South Korea.

India is the world’s largest importer of weapons. It has a 14% share of the worlds’s arms imports. India’s defense sector has attracted only $4.1 million in foreign direct investment until now. Other industries, including services, telecom, and computer software and hardware, have each attracted more than $10 billion.

India’s budget used to usually be presented at 5:00 p.m. on the last working day of February. The tradition dated back to pre-Independence when India’s budget was presented after the United Kingdom’s budget was presented in Parliament in London. In 1999, the norm for the budget presentation became 11:00 a.m.

Over the years the length of budget speeches have varied but they usually tend to be a bit long winded. While the budget speech in 2012 was more than 32 pages, India’s interim budget for 1977-78 was just 800 words.

Two major events this week – the railway budget announced on Tuesday and the Economic Survey released Wednesday – sent Indian stocks lower, so some analysts are already trying to lower expectations about the budget. “The new government has been in power for just six weeks and (the) budget is just a first step in a five-year run,” Citi wrote in a research note Tuesday. Still, Citi is hoping for moves to kick-start investments, a roadmap for tax reform and steps to improve India’s fiscal situation.

Arun Jaitley says he’ll maintain the government’s existing commitments to rural development: Road-construction, home-building and job-guarantee programs will remain intact. Mr. Jaitley offered an intriguing hint on fixing one common criticism of that last one: The Mahatma Gandhi Rural Employment Guarantee, he said, will be more closely linked to asset creation. We’ll see what specifically that means once the full budget details are released.

If the government wants to make medicines affordable for poor Indians, it should bear that financial burden not drug companies, said Kiran Mazumdar-Shaw, the head of Indian biotechnology firm Biocon. The government controls prices for approximately 30% of the drugs sold in India and it has hinted that it wants to expand that list further. “Instead of forced rebates, let competitive factors kick in to give you lower prices,” said Ms. Mazumdar-Shaw. “Bulk acquisition will push down prices. But that will only happen if the government gets more involved in procurement.”

Budget speeches have traditionally been garnished with quotes and verses by famous philosophers, poets and scientists. The last two budget speeches delivered by former finance minister P. Chidambaram proved his affection for the Tamil poet Tiruvalluvar and Swami Vivekanand. He concluded the interim budget speech delivered ahead of the national elections as well as the annual budget speech in 2013 quoting each of them.

Agricultural industry as well as consumers may need some help from the government this year. Monsoon rains are 43% below normal so far this rainy season. Weather officials have predicted rainfall may be scanty even in August and September due to the El Nino weather phenomenon which is caused by the warming of the Pacific Ocean.

Finance Minister Arun Jaitley allocated 2 billion rupees to build a statue Sardar Patel–known as the “iron man of India” for his part in the country’s independence struggle. For comparison: Mr. Jaitley also allocated 1 billion rupees for women’s safety in India’s largest cities and 1 billion rupees for Muslim education centers.

The Patel statues has long been a contentious issue. Both the opposition Congress Party and Mr. Jaitley’s Bharatiya Janata Party have been wrestling to claim a piece of Mr. Patel’s legacy. Last October, India’s new prime minister, Narendra Modi, laid the foundation stone for an almost 600-foot-tall “Statue of Unity”–a sculpture of Mr. Patel–on a little island downstream of the Sardar Sarovar Dam on the Narmada River in the south of Gujarat. At the time, Mr. Modi was Gujarat’s chief minister.

The Indian government says it will focus on creating manufacturing jobs, which dovetails nicely with its goal of increasing the sector’s contribution to GDP to 25% in the next few years. But those efforts could be hamstrung by oppressive labor laws that make it difficult to lay off workers when the economy slows. As a result, companies are hesitant to provide high quality, full-time jobs.

Mr. Jaitley stresses Prime Minister Narendra Modi’s plan to bring urban amenities to rural areas. This was a priority area in the former Bharatiya Janata Party government under Atal Bihari Vajpayee from 1999 to 2004. Mr. Modi’s government calls it a “Rurban” push. Mr. Modi’s government had said earlier that it would focus on constructing toilets in every home and promote rapid rural electrification. Mr. Jaitley has also allocated more than 70 billion rupees to modernize 100 mid-tier Indian cities as “smart cities.”

Indian Finance Minister Arun Jaitley has made some of the right noises his budget speech such as proposing to raise foreign investment caps. Still, stock investors don’t seem too excited. S&P BSE Sensex fell 1.1% to 25,164.17.

While the new government is unlikely to announce big changes in the country’s strict labor laws in the national budget this week, economists and executives say it needs to move quickly to loosen the laws if it wants to prompt a much-needed jump in investment and job creation. It has already shown it is ready to tweak the archaic labor laws of Asia’s third largest economy.

The finance minister is talking about exports. One of India’s fastest growing exports is automobiles.

The Indian auto industry wants the government to tweak its tax policies to boost consumption and exports. The Society of Indian Automobile Manufacturers would like the government to put aside some money to encourage people to get rid of their polluting cars and trucks in return for some monetary compensation for their old vehicles. For the majority of Indians that can’t afford cars, the group would like to see the government pledge more spending on buses by state-run transport companies.

India’s information technology industry probably grew less than 10% in the last fiscal year. That’s the slowest growth rate in 12 years. It is hoping the budget will include some tax breaks and government spending to encourage innovation and startups so the industry can graduate from being just a big pool of inexpensive telemarketers and programmers.

Even if Finance Minister Arun Jaitley doesn’t spell out the details of any government recapitalization plan, he could announce other moves, such as changes to management and operations at state lenders. “While several factors could have led to their present difficulties,” the RBI committee’s report says, “public-sector banks cannot continue to be governed and managed in the existing manner without greater financial damage in the years ahead.”

The finance minister said he was committed to providing power for all.

Indian energy companies hope the budget includes indications that the government is ready to end its control of fuel prices. Right now India forces fuel retailers to sell diesel, kerosene and cooking gas at state-set rates and then compensates them for their losses with subsidy payouts. Meanwhile power companies are often running out of fuel because the South Asian nation restricts natural gas prices and maintains a monopoly over coal production.

The Finance Minister says he will promote better use of Special Economic Zone, but makes no mention of the biggest reason why companies shy away from them: minimum alternate tax. These zones were exempt from income tax, “however, a few years ago, Chidambaram decided to impose MAT, discouraging companies from setting up new units in the SEZ,” says Dilip Shah head of the Indian Pharmaceutical Alliance. The MAT is currently around 20%.

The finance minister said a committee will be formed to look into the problem of retroactive taxation.

Big foreign firms as well as tax consultants and lawyers hope the budget will include some clarity on whether the new government plans to continue to retroactively apply new tax laws. India’s decision to slap a multi-billion dollar tax bill on Vodafone Group for its acquisition of the shares of Hutchison Whampoa’s India venture has made some big international as well as local companies slow down their expansion and acquisition plans in India, worried that the country’s aggressive tax authorities will make it tough to ever turn a profit here.

India’s 2013 budget allocated around 800 billion rupees to the education sector, investing over 250 billion rupees in primary education but only around 30 billion rupees in secondary education. Education experts expect that the 2014 budget will direct more money towards secondary education.

“We need more secondary schools, more teachers,” said Ashish Dhawan, head of Center Square Foundation, a New Delhi-based education fund and think tank. “With primary schools, the government should focus on improving quality, efficiency and teacher training.”

Mr. Jaitley said the government was ready to start implementing the goods and services tax — a reform the retail industry has been waiting for.

In the latest sign enthusiasm has been dwindling about India’s retail market, Carrefour, the world’s second-largest retailer, announced it was pulling out of the country this week. Unless the budget offers hope for further deregulation, some analysts believe other foreign retailers may follow suit and give up on India soon.

Minutes after Arun Jaitely announced the government will spend 2 billion rupees to build a statue of Sardar Patel, an independence leader, the “iron man of India” began trending on Twitter. Some people seemed baffled by the amount dedicated to building a sculpture and compared it to allocations made by the finance minister to more pressing issues like women’s safety and sanitation.

India will need to significantly increase spending in the 2014 budget to fix its ailing health system. Public expenditure on health is around 1.3% of its gross domestic product, according to data from the World Bank. The U.S.’s public spending on health is 8.3% of its GDP, China’s is around 3% and war-torn Afghanistan spends 1.8%, according to the World Bank. In the budget, the government is likely to try to reduce out-of-pocket payment requirements on healthcare for the poor.

Six new debt recovery tribunals will be set up to deal with the rising amount of bad loans on the books of public-sector banks, says Jaitley Bad loans were at a record-high in January, which threatened to curb lending.

As India unveiled its latest budget some Indians were paying more attention to the price of chilies.

“We don’t know what budget is,” said Bimala a cleaner who goes by one name and was taking a break from her job Thursday to do some shopping in New Delhi. “Green chilies that used to be about 10 to 12 rupees a kilogram are now 80 rupees per kilogram. If prices keep on rising this way, this government will also fall.”

The finance minister said power plants should be provided adequate coal supplies to generate electricity. Shortage of coal is one of major problems hurting India’s power generation. Mr. Jaitley proposed a fund of 1 billion rupees to promote use of clean-coal technologies and a sum of 5 billion rupees for solar power projects in Rajasthan , Tamil Nadu and northern state of Jammu and Kashmir.

The finance Minister urged regulators to take steps to deepen and create a more liquid market for corporate bonds. He also asks them to make it easier for Indian companies to list securities overseas, via American Depositary Receipts and Global Depositary Receipts. At the same time, he asks regulators to revamp existing systems to allow foreign companies to issue securities on Indian markets, through a so-called “Bharat Depositary Receipt”

The budget supports allowing the Indian banking sector to raise long-term funds. This could be a big boost to the banks who want to fund infrastructure. Funding infrastructure projects creates a problem of asset and liability mismatch. While the average duration of fixed-deposit is five years, infrastructure projects take 10 to 20 years to be completed and generate returns.

Jewelers are hoping Finance Minister Arun Jaitley will reduce the import tax on gold and unwind other policies that have shrunk imports of the precious metal. In the run up to the budget, the premium paid in India for gold has fallen in anticipation of lower restrictions. “There is expectation of a lowering of gold duty,” says Jeremy East, the Hong Kong-based managing director and head of commodities at Standard Chartered Bank. “I think the focus for the second half of this year is going to be on India,” as its demand revives, he said.

India is playing catch-up with China, which in recent years has built a labyrinth of roads along its border with India for better connectivity and to facilitate military deployment. Mr. Jaitley announced his government’s plan to develop India’s railways in border areas. He also announced more than 20 billion rupees to boost border infrastructure and nearly 10 billion rupees for the socioeconomic development of villages along the border. His budget also gives a big push to road-building and railway connectivity in India’s neglected northeastern states, many of which abut China.

Investors said they are largely disappointed with the lack of big moves in the budget. “Investors were expecting more clarity on retrospective tax,” said Gaurav Dua, head of research at Mumbai broker Sharekhan. Investors were also looking forward to more promises of help for state-run banks, he said. State-run banks have been particularly hit by bad loans.

Arun Jaitley says he will try to fix the issue of an inverted duty structure, where less tax is charged on finished products than on raw materials. This discourages investment and growth in the manufacturing sector, say Indian executives. Inverted duties are one of the biggest reasons why India imports almost all of its electronics.

India’s hunger for smartphones and televisions is a huge burden on the current account, and electronics imports are projected to surpass oil to become the biggest foreign currency drain in the next several years.

Not everyone is impressed with the Finance Minister’s dizzying number of projects and the amounts being spent. Twitter is already poking fun at the “100 crore budget” (1 billion rupees), a reference to the most common amount being spent on projects in the budget.

Ishwar Chand, a 49-year-old watch repairer at New Delhi’s Shankar Market, said he was not expecting any miracles from the budget. “I think it will take two to three years for the good days to come as promised by the Modi government,” Mr. Chand said. “But right now, for middle-class people like us, the expectation is that the cost of public transport and basic necessities of life (should be kept from) going out of reach.”

The finance minister tried to address some issues with custom duties where it is sometimes cheaper to import finished products than raw materials, but not everyone got relief. Soap manufacturers and makers of cathode-ray televisions got some duty relief. Computer components are now exempt from import duties as well. Left out are drug-makers and anyone who makes an LCD television larger than 19 inches.

It took 2 hours and 15 minutes for Mr. Jaitley to outline the Modi Administration’s first annual budget. This included a brief break he requested to catch his breath and some moments of pause during heckling from the opposition.

Stock dealers in Mumbai cheered as the stock market erased early losses and moved up. They said they expect the announced tax changes for foreign portfolio investors to lift sentiment. “We think the tax outflow for these kind investors will come down by almost half from the previous levels,” said Sunil Sarda, chief executive of Systematix Shares & Stocks. “I will give the budget 8 out of 10.”

Finance Minister Arun Jaitley’ s commitment to end the retroactive enforcement of tax changes was a welcome move that’ll bolster investor confidence, said Girish Vanvari co-head of tax at consulting firm KPMG’s India office. But the bigger concern is still how the government deals with the current disputes with companies such as Vodafone Group, he said.

Finance minister Arun Jaitley announced slew of tax incentives for conventional and renewable power companies. He said he will extend 10-year tax breaks to power generation, transmission and distribution companies that start operating before March 31, 2017. The minister also said he will simplify tax structure on imported coal as local shortages have forced utilities companies to buy overseas coal. To boost wind and solar power generation, he also announced a series of customs and excise duty cuts.

The finance minister increased taxes on cigarettes, chewing tobacco and other tobacco products by amounts ranging from 11% to 72% in an effort to improve public health. Users of gutka, a cheap form of chewing tobacco that is popular in India among poorer people, will now face tax of 70%, up from 60%. Roughly 14% of Indian adults smoke cigarettes and “beedis” (hand-rolled cigarettes), and nearly 26% use smokeless tobacco, according to a government of India survey.

India’s Finance Minister Arun Jaitley’s budget proposal to allow real estate investment trusts (REITs) and infrastructure investment trusts will provide a fillip to the property sector by opening up a new avenue of funding. REITs are listed on stock exchanges and invest in leased office and retail assets and distribute most of their income to shareholders as dividends. Draft regulation for REITs has been in place for many years but implementation was postponed due to tough global economic conditions.

The finance minister said changes will be made to the existing mining law to facilitate adequate mining of minerals such as iron ore without sacrificing the environment. A plan to bring in changes to India’s archaic mining law has been languishing in Parliament for past few years. The industry has opposed the proposed profit-sharing with displaced people and high royalty payouts under a draft law that was tabled in the parliament in 2011. Mr. Jaitley didn’t elaborate on the planned changes he would like to bring to the law.

Finance Minister Arun Jaitley said today’s budget was “only the beginning” of a journey toward sustained GDP growth of 7% to 8%. He may have been trying to dampen the hype that has accumulated in the run up to Thursday’s announcements. Mr. Jaitley said he’ll focus on reviving manufacturing and infrastructure while also ensuring adequate government revenue to pursue development objectives.

The opposition Congress party criticized Finance Minister Arun Jaitley for failing to announce “even one big-bang idea” in his government’s first budget. “It is an unmitigated disaster, a super-flop budget,” Sanjay Jha, a Congress party spokesman told The Wall Street Journal.

Of course, you wouldn’t necessarily expect the Congress party to raise a rousing cheer for the budget proposals of the Bharatiya Janata Party—which thoroughly drubbed Congress out of power earlier this year.

Mr. Jha dubbed the budget “an assortment of smaller announcements. In the attempt to please all, the BJP ended up pleasing none.” Mr. Jaitley announced “nothing on labor laws, banking recapitalization,” Mr. Jha said. Senior Congress party leader Manish Tewari said of the budget: “There is no vision; no roadmap.”

Finance Minister Arun Jaitley made no mention of plans to free up government controls on the pricing of diesel. Energy companies have been hoping for some diesel deregulation as they have been struggling with losses from being forced to sell the fuel at a loss.

The Indian rupee was little changed but analysts said the measures announced in the budget to allow more foreign direct investment in insurance and defense sectors will be a positive for the Indian currency. “There has been no specific proposal except that regulators need to develop the currency derivative market further,” said Hemal Doshi, currency strategist with Geojit Comtrade. He said the dollar could move towards 58.00 rupees in the next six months to a year. The dollar is now trading at around 59.70 rupees.

The finance minister’s measures to allow local and foreign manufacturers to sell their wares online without special permission from the government is aimed at pushing local manufacturing in India, says Sandeep Ladda, technology leader at PwC India. Foreign retailers can now manufacture products here and sell them online. Still, Mr. Ladda said he is disappointed that the government didn’t offer any clarity about allowing foreign investment in the e-commerce sector. The new measures don’t change any rules for online retailers such as Amazon.in, Flipkart.com and Snapdeal.com in India, Mr. Ladda said.

Comments (5 of 10)

Modi said that (approx.) 40% of the population are unable to avail the banking services. He termed this as a “financial untouchability”. Thus, “financial inclusion” was important to be introduced which will also help the poor people get rid of the ‘sahukaars’ (money lenders)- a debt relief! Now every family will have an account in a bank.Day!. http://goo.gl/KwgJz1
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9:31 pm July 29, 2014

N.L. joshi mewar wrote:

It is very good budget of NDA Govt which strengthen basic infrastructure of our economy.

8:26 am July 13, 2014

Sanjay wrote:

This budget tried to do is lift the mood of their strong middle class contituency by taking away a smaller share of rupee through a slew of tax breaks.

4:02 pm July 12, 2014

wellwisher wrote:

well, government can reconsider the amount that to be spent on the statue of Sardar Patel , keeping due respect to him and his contribution in building the post independent India. this money can be prioritized to other infrastructure building. the amount allocated for this project sounds unnecessary .

8:18 pm July 11, 2014

Dr A V Rao wrote:

When we , ourselves had criticized Ms Mayawati, former Chief Minister of UP for erecting statues of Mr Kansiram and of hers by spending crores of Rupees, why should we do the same mistake. This amount may be diverted for strenghthening of existing school, providing good infrastructure in Hospitals, or diverting this amount for uplifting the poor.
For income tax payers infrastructure bonds might have been introduced for tax benefit. Further this amount can be utilized for various infrastructural project without any cost.

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India Real Time offers analysis and insights into the broad range of developments in business, markets, the economy, politics, culture, sports, and entertainment that take place every single day in the world’s largest democracy. Regular posts from Wall Street Journal and Dow Jones Newswires reporters around the country provide a unique take on the main stories in the news, shed light on what else mattered and why, and give global readers a snapshot of what Indians have been talking about all week. You can contact the editors at indiarealtime(at)wsj(dot)com.